APP Insurance and Indemnification Strategies Flashcards
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Read the first 6 APP Insurance and Indemnification Strategies flashcards as text
Which insurance mechanism allows high-net-worth individuals to group together to self-insure unusual or high-value risks not covered by commercial markets?
Answer: Risk retention group (RRG)
A risk retention group is a liability insurance company owned and operated by its members, allowing similar businesses or individuals to self-insure shared risks.
When an asset protection plan includes a life insurance policy held in an Irrevocable Life Insurance Trust (ILIT), a key benefit is:
Answer: The death benefit is shielded from the insured's estate and creditors
An ILIT owns the life insurance policy, removing the death benefit from the insured's taxable estate and placing it beyond the reach of the insured's creditors.
Which term describes a provision in an indemnification agreement that limits the indemnitor's liability to a specified dollar amount?
Answer: Cap on indemnification
A cap on indemnification sets an upper limit on the indemnitor's financial exposure, providing predictability in risk allocation between contracting parties.
An 'additional insured' endorsement on a liability policy is most commonly used in asset protection to:
Answer: Extend coverage to another party who may be held liable for the named insured's operations
An additional insured endorsement grants a third party protection under the named insured's policy, often required by contracts to ensure protection extends across all involved parties.
Which form of insurance is specifically designed to cover losses when a key person in a business dies or becomes disabled, protecting the business's financial assets?
Answer: Key person insurance
Key person insurance compensates a business for financial losses stemming from the death or disability of a critical employee or owner, preserving business assets and continuity.
In a broad indemnification clause, the phrase 'arising out of or in connection with' is significant because it:
Answer: Expands the scope of covered claims to include indirect and consequential losses
This broad causation language widens the indemnitor's obligation to cover any claim with a meaningful connection to the specified activity, increasing asset protection for the indemnitee.